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Thursday, March 3, 2016
ING Senior Economist Talks About the Idea of "Helicopter Money" in Europe
A tip of the hat to Willem Middelkoop for posting this on his twitter feed about a major bank (ING) actually talking about the idea of sending "helicopter money" directly to individual bank accounts to try and get the economy (in Europe) moving. I also found this on the ING web site here. Below are some quotes from the ING site. You may need to use the translate button to read the article in english on the ING site.
In 90 seconds - Can helicopter money for a boost worries in the euro zone?
With growth still remains in the eurozone, the European Central Bank (ECB) may need to consider a radical measure. Helicopter Money example?
In this eZonomics video explains Teunis Brosens, senior economist at ING, that the ECB alreadyquantitative easing measures (English version) has taken and the rate cuts so far that it is now negative. But how effective these measures are, is unclear, he says.
Brosens wonders whether other measures to stimulate the eurozone. "Perhaps it is time that the ECB will take into consideration a radical new impetus: helicopter money", he suggests. "As the name suggests, seems helicopter money come fall the money from the air, directly to the bank accounts of the people." In his book The Optimum Quantity of Money it in 1969 economist Milton Friedman suggested already the idea of 'helicopter money' as way to prevent price deflation.Brosens notes: "the purchasing power is boosted immediately by it's probably a much more effective way to stimulate spending than the measures taken so far, such as the purchase of assets.." Read a positive analysis from 2014 helicopter money.
Brosens notes that there are also many risks sitting on helicopter money.
"A negative rate may be increased by one stroke. Purchased assets can be sold again. But helicopter money can, once it has spread, never be retrieved by the central bank. These are policies that can not be reversed. In addition, attenuated the balance of the central bank, "he explains.
So it will still take some time, in the eurozone the money comes out of the blue, Brosens concludes."
My added comments: Above is the rough english translation of the article on the ING web site about the idea of helicopter money directly to individual bank accounts. I think it goes without saying that for a major bank to be talking about this idea at all indicates that the monetary policies that have been used to try and boost economic growth are viewed as not working.
Tomorrow we will have an article covering a recent discussion (captured on video) on the potential for the SDR to be used as the new global reserve currency for the world. The discussion included both a current IMF official who works with SDRs right now and the former head of the SDR Division at the IMF (Dr. Warren Coats) who we have contact with by email. Dr. Coats even provided a great quote for our article that readers will want to see.
In the discussion it is clear that these officials do not see an imminent crisis coming at this time even though they do point out that the conditions for one in the future do exist.
Please watch for it and let others know about it as you will not get this kind of direct information from official experts like this very often. It will answer many questions I see from readers and in other discussion forums all over the world about the potential for the SDR as a replacement global reserve currency for the US dollar. It directly addresses the two big questions we follow here on this blog: 1) Will we get another major financial crisis worse than 2008? 2) If we do, will the SDR used at the IMF be used in a new way to address the crisis? Jim Rickards work on this is invaluable (they mention his book in the video) and now we have direct information on both these important questions from both a current and former IMF official on what we can reasonably expect.